Is the Third Time the Charm for United in Tokyo?


United Airlines is looking to fly from San Francisco to Tokyo's Haneda Airport. (Photo: United Airlines)

United Continental is the world's largest airline, and the top airline for travel between the U.S. and Asia. However, it has been locked out of Tokyo's popular Haneda Airport for years. For the past three years, its top two rivals -- Delta Air Lines and AMR -- have offered flights to Haneda, but United has been unable to do so.

United sees this as a big disadvantage, as Haneda is preferred by the business travelers it tries to court. However, the carrier may finally have an opportunity to serve Haneda. AMR's American Airlines recently decided to cancel its unprofitable route between New York's JFK Airport and Haneda, putting one slot up for grabs. United has applied to take over that slot for a flight to San Francisco, and appears to be the front runner.

Courting business travelers
Haneda is the closest airport to downtown Tokyo, but since 1978 most international flights have had to use Narita Airport, which is nearly 40 miles from the city center. Over time, the Japanese government has allowed some international flights to return to Haneda. In many cases, these flights have been more profitable than comparable flights to Narita, as business travelers who are in a hurry may pay extra to avoid the inconvenience of traveling to Narita.

Finally, in 2010, the U.S. was offered slots for four round-trip flights to Haneda Airport, to be distributed among U.S. carriers. Even though these slots are at undesirable overnight times, there was fierce competition for the slots.

The U.S. Department of Transportation had to distribute the four slot pairs among five competing airlines proposing a total of 10 routes. While United had proposed a flight to San Francisco and Continental had proposed flights to Newark and Guam, all three were rejected in favor of flights to New York, Detroit, Los Angeles, and Honolulu.

A second chance
Airlines like United that missed out during the initial round of bidding soon got a second chance for Haneda access. It turned out to be very challenging to operate profitable flights between Haneda and the eastern U.S. The awkward time restrictions for U.S. carriers at Haneda more than offset the advantages of being closer to downtown Tokyo. The effects were particularly severe for East Coast flights.

As a result, in mid-2012, Delta Air Lines decided to drop its nonstop flight to Detroit and asked the DOT for permission to fly instead between Seattle and Haneda.

Delta Air Lines holds two of the four slot pairs reserved for U.S. carriers at Haneda.

While United protested and tried a second time to get permission to fly from San Francisco to Haneda, the DOT sided with Delta. United's appeal may have been held back by the fact that Japan Airlines began serving the San Francisco-Haneda route in 2010, whereas Seattle had no nonstop service to Haneda.

One last try
American Airlines has had just as much trouble with its flight to New York as Delta had with its Haneda flight to Detroit. However, American does not have a strong West Coast hub to use as an alternative destination. As a result, American is taking itself out of the running until the Japanese government permits U.S. carriers to operate daytime flights at Haneda. This puts another Haneda slot back up for grabs.

American Airlines is dropping its only Haneda flight at the beginning of December.

For a third time, United is applying to fly between San Francisco and Haneda, and proposes to begin flights next summer. This time, United seems to have a clear path. American and US Airways are more focused on completing their merger than figuring out how to make a flight to Haneda work.

Meanwhile, Delta already controls half of the four flights allocated to U.S. carriers and is only interested in expanding at Haneda if it can move its entire Tokyo hub back from Narita. Lastly, smaller carriers cannot offer the connecting options United provides in San Francisco.

Foolish conclusion
United has been desperate to gain entry to Tokyo's Haneda Airport ever since the U.S. received four slot pairs in 2010. However, it was passed over by the Department of Transportation in each of its first two attempts to gain a slot.

Luckily, it has just received a third opportunity, courtesy of AMR's decision to end its Haneda-New York flight. This time, United is the best-positioned American carrier to take over the extra Haneda slot pair. As a result, by next summer, United customers should finally have access to Tokyo's Haneda Airport, allowing them to avoid the long travel times between downtown Tokyo and Narita Airport.

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Adam Levine-Weinberg is short shares of United Continental Holdings. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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